Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

0

Share

Download to read offline

Investments in ports in financial turbulence times

Download to read offline

Steven Bouckaert, Senior manager at MTBS (Netherlands)

Related Books

Free with a 30 day trial from Scribd

See all
  • Be the first to like this

Investments in ports in financial turbulence times

  1. 1. maritime & transport business solutions Investments in ports in financial turbulent times Maritime Days, Odessa
  2. 2. MTBS Services and Solutions 05 July 2011 Scopeof Works- PortinvestYuzhny 13www.mtbs.nl maritime & transport business solutions 13 Value& Business Strategy PortSector Reform PortPolicy Public PrivatePartnerships Institutional & Regulatory Change OrganizationalReform& Alignment ValueCreation & Protection FinancialModeling and Analysis Feasibility ProjectStructuring & Packaging Business Case Risk Valuation, Allocation, Mitigation Transaction Strategy Transaction Management Documentation & Contracts Tendering & negotiated Solutions FinancialSolutions LegalSolutions FinancialStructuring ProjectFinance DueDiligence Procurementof Finance Investment/ Divestment Merger & Acquisition strategy finance transactions valuation
  3. 3. MTBS is a global leader in port & maritime advisory services MTBS’s experience in the Port & Infrastructure Sector MTBS’s Clients in the Port & Infrastructure Sector Global leader in Port Transaction  MTBS is the global leader in transaction advisory services in the port sector with a high success rate on both sell-side & buy-side transactions  MTBS is independent, flexible and international.  MTBS are recognized content-leaders: implementing international best practice transaction services and products. Experienced and Qualified Team  MTBS dedicated port team is the largest and most experienced team, certainly when compared with global accounting & strategy consultants.  MTBS’ senior experts have a long corporate history in blue chip organisations such as Deloitte, PWC and Royal Haskoning, Royal Boskalis, Port of Rotterdam, PSA.  MTBS’s team of experts all have deep-rooted experience in Strategy, Business valuation, Transaction and Finance. International Sector Focus  MTBS is an international consulting company with leading maritime sector focus. 3
  4. 4. … with a global track record of port projects… Ongoing Transaction Successful Transaction Completed Port Project 4
  5. 5. … with significant recent successful Port Transaction implementations … 5
  6. 6. Financial Advisor Brooklyn-Kiev Port Odessa, Ukraine Container Terminal Equity Valuation Deal size US$ 37 million senior loan Total project cost US$ 130 million 2009 Financial Advisor Egypt, Cairo Bid Preparation Dry Bulk Terminal El Dekheila 2006 Deal size confidential Flag of Country Transaction advisor Public Water Transport System Dubai UAE Deal Size: US$ 25 million 2007 Financial Advisor West Africa Container Terminal Onne Nigeria Dealsize confidential 2004 6 … with significant recent successful Port Transaction implementations …
  7. 7. 530 Mt* 150 Mt The Region 7 Recent key shipping economic developments Recent key political developments 390 Mt * Excluding Russia Far East Diverse and challenging landscape
  8. 8. Mediterranean Port Landscape It is a patchwork 8 • High CAPEX • Highly Competitive (initial cash flows) • Many players • Multiple PPP structures • Range Greenfield - Privatisation • Major trades/ different demands
  9. 9. International Operators in the Med HPH PSA DPW Eurogate ICTSI Contship Italia Mersey Docks Dragados / Noatum APM Terminals Evergreen COSCO MSC CMA CGM TCB 9 Summa HPC/HHLA
  10. 10. Challenges for investors – a snapshot • Political Risk • Physical war or upraises, also if outside country • Trade war & custom regulations • Change of Contract • Change of Control • Shipping patterns • Direct calls to Black Sea • Or, on the contrary: fragmented again • Ships deployed/ Bosphorus • Capacity developments • Large addings of capacity in Marmara and East Med • Overcapacity in Ukraine • Taman development? • Privatisation leading to stronger competition 10
  11. 11. 11 Unlocking Value 𝑁𝑃𝑉 𝑖, 𝑁 = 𝑡=0 𝑁 𝐹𝐶𝐹𝑡,𝑔 (1 + 𝑖) 𝑡 Growth Free Cash Flows De-Risking
  12. 12. What to do as an investor • Hinterland Cargo • anchor important (different commodities) • BOT/ Concession contract • Force Majeure clause • Sovereign guarantees • Flexible concession fee structure • Flexible guarantees • Flexible term • Financing: • Role for DFIs and ECAs • Sovereign guarantees • PPP Equity? 12 • CAPEX allocation PPP • Fix vs moveable • Risk engineering • Safety • Permitting • Value Engineering: • Phased investment • Combined cargo mix • Offtake/ secured volumes allignment • Diversification: • Geographically • Cargo mix • Partnering: • How to secure long term? • Changing structures of power?
  13. 13. The bankability Challenge 13 (400) (300) (200) (100) - 100 200 300 400 0 5 10 15 20 mioUSD Cash Flow Diagram Cumulative FCF Investments Opex Revenues • This Greenfield port project has a project IRR of 19% and a positive NPV. • However, the first year of positive Free Cash Flow is in year 6 • The pay-back period is 10 years from initial investment. • Vale created after the expansion investments in year 15 are not of interest for the lenders! • So, how bankable is this project for project financing?
  14. 14. The Bankability Challenge a viable project is not yet a bankable one 14 Economic & Financial Balance Financial Viability Bankability IRR NPV Secu- rities DSCR • Determined over a period of > 20 years • Includes future project phases • Determined over a period of < 20 years • Depending of project start-up phase
  15. 15. Project Bankability a viable project is not yet a bankable one • Debt service • CAPEX aligned with revenues • Value Engineering • Increased need for proper valuation methods and modeling • Securities • Proper structuring • Proper risk engineering • Quantification (value) of impact of different structures and risk allocations: create value • Safeguarding in the mean time authorities interest to retain discretion over policy • New era of contract engineering 15
  16. 16. Value engineering Additional value should be created to make the project bankable • Commercial understanding is primordial: • Engineering follows commercial reality • Off-take contract versus TSA growth • How to tie in committed cargo • Value engineering to increase initial bankability while preserving financial and commercial viability (NPV/ IRR), some examples • Mobilisation costs • Cost of possible later demolishing costs • Costs for eventual later stage of expansion • Impact of value engineering options on commercial and financial viability and on bankability have to be quantified in a clear valuation model • Value engineering options need to be translated in a proper structuring of the project, split of obligations and risks, and consecutive contract flow 16 Commercial aspects Technical aspects Value Engineering options: • Securing cargo/ cargo types • Phasing • Construction time Quantification of options: • Viability (NPV/IRR) • Bankability (DSCR) • Commercial viability (sensitivity) Translate option in structuring Translate option in contract flow ValueCreationandOptimisation
  17. 17. 2nd MED Ports 2014 Exhibition and Conference Marrakech23 & 24 April 2014 17 Full BOT Medium BOT BOT light Landlord Viable +/- high risk Yes Yes No Bankable Uncertain +/- Yes Limited Market appetite Limited/ uncertain Attractive Highly attractive Only Terminals Concession term Freehold Long (>50yrs) Shorter Terminal: 25y BOT • Land • Environmental • Breakwater • Dredging • Port civils • Fleet • Quays Terminal operators PA PA • Land • Environmental PA • Land • Environmental • Breakwater BOT • Breakwater • Dredging • Port civils • Fleet • Quays BOT • Dredging • Port civils • Fleet • Quays Terminal operators Terminal operators BOT Full BOT Medium BOT Light = BOT = PA PA • Land • Environm. • Breakwater • Dredging • Port civils • Fleet • Quays Terminal operators Landlord = TO Project Structuring Different models with different specifications
  18. 18. 18 PDMC Model as balanced alternative to BOT Lead shareholder Public shareholders Private shareholders DFI’s Port authority 1. Master Concession
  19. 19. 19 Structured Financing Potential involvement of DFI’s: • Longer tenors • Longer grace periods • Sculpted repayment schemes • Often regarded as subordinated to commercial lending • Interest similar to commercial banks, unless it is tied or backed by sovereign guarantees • Standby credit facility Equity Debt Lead Partner Other International Terminal Operator Infrastructure Funds, Shipping Lines, etc. DFI Commercial Loan Pool of DFI’s / Multilaterals Pool of Commercial Banks 35% 65%
  20. 20. Creating value and Bankable Projects Impact of Value Engineering and Structuring 20 Value/ viability Bankability DSCR   Securities  Initial Value Engineering Value Contracting
  21. 21. What to do as an investor • Hinterland Cargo • anchor important (different commodities) • BOT/ Concession contract • Force Majeure clause • Sovereign guarantees • Flexible concession fee structure • Flexible guarantees • Flexible term • Financing: • Role for DFIs and ECAs • Sovereign guarantees • PPP Equity? 21 • CAPEX allocation PPP • Fix vs moveable • Risk engineering • Safety • Permitting • Value Engineering: • Phased investment • Combined cargo mix • Offtake/ secured volumes allignment • Diversification: • Geographically • Cargo mix • Partnering: • How to secure long term? • Changing structures of power?
  22. 22. Conclusions • Investors face many challenges investing in East Med and Black Sea: • Political risk • Shipping line patterns • Capacity additions • Improved performance competing port following privatisation • Unlocking investments institutional: • CAPEX structuring • Concession contract conditions: flexible, guarantees, Force Majeure • Sovereign Guarantees • Structured (DFI) financing • Business approach • Cargo diversification • Geographical diversification • Partnering • Hinterland anchoring (multiple cargoes) 22
  23. 23. General Conclusions • Each region has peculiar problems and challenges • Each country is specific • PPP models • State intervention and Guarantees (financing) • Labour • Cargo flows not always logic: customs, trade agreements, impediments • Every deal is tailor-made • Concessions: Quid Force Majeure? Who takes the risk? • Role for DFIs? 23
  24. 24. maritime & transport business solutions maritime strategy & finance advisors | +31 10 2865940 | info@mtbs.nl | www.mtbs.nl Wijnhaven 3E P.O. Box 601 3000 AP Rotterdam The Netherlands White House, Rotterdam t e w

Steven Bouckaert, Senior manager at MTBS (Netherlands)

Views

Total views

1,324

On Slideshare

0

From embeds

0

Number of embeds

332

Actions

Downloads

22

Shares

0

Comments

0

Likes

0

×